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Fixed-rate mortgages are first choice despite cost

Are you looking to fix your mortgage? Act fast to get the best deal as the average interest rate on fixed-rate mortgages is increasing.

The average cost of a fixed-rate mortgage has risen in the last month, according to finance information company Moneyfacts (www.moneyfacts.co.uk). However, fixed-rates are still proving popular with people who want protection from possible future rate increases.

Borrowers with smaller deposits have been hardest hit, with the average interest rate for a 10-year fix at 85% loan-to-value (LTV) increasing from 6.55% to 6.75% in the last month.

Even mortgages for those with a 40% deposit have become more expensive. At 60% LTV, the average 10-year fix has increased from 5.19% to 5.27% and the average two-year fix from 4.06% to 4.13%.

However, fixed-rate mortgages are still proving popular. According to mortgage broker John Charcol (www.charcol.co.uk), the proportion of borrowers applying for fixed-rate mortgages has continued to increase, from 80.9% in March to 82% in April.

At the beginning of this month, Charcol’s mortgage expert Ray Boulger advised: “Switching to a fixed-rate for at least five years will be the best way for most people to buy protection from increased rates.”

He recommended that those looking to switch mortgages seek guidance from an independent mortgage broker.

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